ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

þ

TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the
transition period from April 1, 2009 to December 31,
2009

Commission
file number 0-52491

MIMEDX
GROUP, INC.

(Exact
name of registrant as specified in its charter)

Florida

26-2792552

(State or
other jurisdiction of incorporation)

(I.R.S.
Employer Identification Number)

811
Livingston Court, Suite B

Marietta,
GA

30067

(Address
of principal executive offices)

(Zip
Code)

(678) 384-6720
Registrant’s telephone number, including area code

Securities
registered pursuant to Section 12(b) of the Act:
None

Securities
registered pursuant to Section 12(g) of the Act:

Common
Stock, par value $0.001 per share

(Title of
class)

Indicate
by check mark whether the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
YesoNoþ

Indicate
by check mark whether the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. YesoNoþ

Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days. Yesþ
Noo

Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate Website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§229,405 of this chapter) during the
preceeding 12 months (or for such shorter period that the
registrant was required to submit and post such files). YesoNoo

Indicate
by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of the registrant’s
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.o

Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of “large accelerated
filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):

Large
accelerated filer o

Accelerated
filer o

Non-accelerated
filer o

Smaller
reporting company þ

(Do not
check if a smaller reporting company)

Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). YesoNoþ

The
aggregate market value of Common Stock held by non-affiliates on
September 30, 2009, based upon the last sale price of the
shares as reported on the OTC Bulletin Board on such date, was
approximately $24,400,000.

There were
51,331,613 shares of Common Stock outstanding as of March 15,
2010.

Documents
Incorporated by Reference

Portions
of the proxy statement relating to the 2010 annual meeting of
shareholders, to be filed within 120 days after the end of the
fiscal year to which this report relates, are incorporated by
reference in Part III of this Report.

This
Form 10-K and certain information incorporated herein by
reference contain forward-looking statements and information within
the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities
Act of 1933, and Section 21E of the Securities Exchange Act of
1934. This information includes assumptions made by, and
information currently available to management, including statements
regarding future economic performance and financial condition,
liquidity and capital resources, acceptance of the Company’s
products by the market, and management’s plans and
objectives. In addition, certain statements included in this and
our future filings with the Securities and Exchange Commission
(“SEC”), in press releases, and in oral and written
statements made by us or with our approval, which are not
statements of historical fact, are forward-looking statements.
Words such as “may,” “could,”
“should,” “would,” “believe,”
“expect,” “anticipate,”
“estimate,” “intend,” “seeks,”
“plan,” “project,” “continue,”
“predict,” “will,” “should,”
and other words or expressions of similar meaning are intended by
us to identify forward-looking statements, although not all
forward-looking statements contain these identifying words. These
forward-looking statements are found at various places throughout
this report and in the documents incorporated herein by reference.
These statements are based on our current expectations about future
events or results and information that is currently available to
us, involve assumptions, risks, and uncertainties, and speak only
as of the date on which such statements are made.

Our actual
results may differ materially from those expressed or implied in
these forward-looking statements. Factors that may cause such a
difference, include, but are not limited to those discussed in
Part I, Item 1A, “Risk Factors,” below.
Except as expressly required by the federal securities laws, we
undertake no obligation to update any such factors, or to publicly
announce the results of, or changes to any of the forward-looking
statements contained herein to reflect future events, developments,
changed circumstances, or for any other reason.

As used
herein, the terms “the Company,” “we,”
“our” and “us” refer to MiMedx
Group, Inc., a Florida corporation (formerly Alynx, Co.), and
its consolidated subsidiaries as a combined entity, except where it
is clear that the terms mean only MiMedx
Group, Inc.

Item 1.
Business

Overview

MiMedx
Group, Inc. (“MiMedx Group”) is an integrated
developer, manufacturer and marketer of patent protected
biomaterial-based products. MiMedx Group is emerging from a
development-focused start-up company into a fully integrated
operating company with the expertise to capitalize on its science
and technology and the capacity to generate sales growth and
profitability.

“Repair,
don’t replace” is the mantra of the MiMedx Group
biochemists, engineers, and designers who are developing
today’s biomaterial-based solutions for patients and
physicians. Market research shows the first desire of patients
ranging from active baby-boomers and weekend warriors to
high-school and professional athletes is to augment repair when
possible, rather than replace traumatized, but otherwise healthy
tissues and structures. Clinical research has proven that
biomaterials can be used to achieve augmentation and
repair.

Our
Strategy

The
Company’s initial business strategy was to identify and
acquire innovative new medical products and
technologies, focused primarily on the musculoskeletal
market, as well as novel medical instrumentation and surgical
techniques. We have recently refined our strategy to focus on our
proprietary biomaterial technologies that can be transformed into
unique medical devices that fill an unmet or underserved clinical
need. Our HydroFix™ hydrogel technology and our
CollaFix™ collagen fiber technology are proprietary platforms
that can serve as the basis for medical devices in various
orthopedic and orthobiologic applications, such as spine, sports
medicine, and trauma. We also have identified multiple product
opportunities in general surgery, drug delivery, wound management
and cardiac markets, among others.

Our plan
is to focus our internal commercialization efforts on orthopedics
and orthobiologic applications for our technologies and to partner
with large, established companies in the general surgery, drug
delivery, wound management, cardiac and other markets. Initial
conversations with respect to such external relationships have been
initiated, but they will take time to develop.

We have
organized an advisory panel of leading physicians to provide
insight into our primary fields of interest for new products and
technology, as well as guidance and advice with respect to ongoing
product development programs.

Under the
direction of our new leadership, our core focus is on near-term
opportunities for each of our technologies, advancing them through
the regulatory process, establishing reliable and cost-effective
manufacturing, and establishing an effective distribution
system.

History of
MiMedx Group, Inc.

MiMedx
Group, Inc. originally was formed as a Utah corporation on
July 30, 1985, under the name Leibra, Inc. We later changed
domicile, through a merger, to Nevada, and subsequently changed our
name to Alynx, Co. We had several additional name changes in
connection with various business acquisitions, all of which were
discontinued or rescinded. We were an inactive shell corporation
for 10 years or more, seeking to acquire an interest in a
business with long-term growth potential. On March 6, 2007,
Alynx, Co. filed a registration statement with the SEC on Form
10-SB to register its common stock under the Securities Exchange
Act of 1934.

In a
merger consummated on February 8, 2008, Alynx, Co. acquired
MiMedx, Inc., a Florida-based, privately-held, development-stage
medical device company (“MiMedx”) founded by Steve
Gorlin. MiMedx’s assets included three development units
focused on the development of medical devices based on their
respective patented and proprietary technologies. MiMedx’s
primary development unit was focused on the development of products
for the repair of soft tissue, such as tendons, ligaments and
cartilage, using a collagen fiber-based platform predicated on
certain cross linking technology, which was licensed from Shriners
Hospital for Children and University of South Florida Research
Foundation in January 2007. The assets of MiMedx also included
100% of the membership interests in SpineMedica, LLC
(“SpineMedica”), a development-stage company focused on
Orthopedic-Spine biomaterial technologies using a poly-vinyl
alcohol (“PVA”) based hydrogel that its predecessor,
SpineMedica Corp., licensed from SaluMedica, LLC for applications
related to the spine in August 2005, and for applications
related to the hand (excluding the wrist) and rotator cuff in
August 2007. Additionally, MiMedx’s assets included
certain intellectual property related to implants for use in
fracture fixation in the upper extremities, which we referred to as
the LeveL Orthopedics assets. These assets had been contributed to,
or developed on behalf of, MiMedx pursuant to a consulting
agreement it had entered into in September 2007, with Thomas
J. Graham, M.D., a leading hand surgeon.

On
March 31, 2008, Alynx, Co. merged into MiMedx Group, Inc., a
Florida corporation and wholly-owned subsidiary that had been
formed on February 28, 2008, for purposes of the merger.
MiMedx Group, Inc. was the surviving corporation in the merger.
Also on March 31, 2008, MiMedx entered into a license with
SaluMedica, LLC, for the PVA-based hydrogel biomaterial for
applications as a surgical sheet outside of the spine.

To assist
the Company in transitioning from a development stage company to an
operating company, effective February 24, 2009, the
Company’s Board of Directors appointed Parker H.
“Pete” Petit to serve as the Company’s Chairman
of the Board, President and Chief Executive Officer. Mr. Petit has
over 30 years’ experience in the healthcare products and
services markets, and a track record of having successfully
nurtured several companies from the development stage to industry
leadership. In September 2009, Mr. Petit recruited
another experienced medical device executive, William C. Taylor, to
become the Company’s President and Chief Operating Officer.
Mr. Taylor has over 20 years’ of medical device
design, development, and manufacturing experience.

On
April 20, 2009, we received clearance from the U.S. Food and
Drug Administration (the “FDA”) to market our
Paradís Vaso Shield™ device, indicated for use as a
cover for vessels following anterior vertebral surgery. In
October 2009, we divested our LeveL Orthopedics assets in
order to focus exclusively on biomaterials, and also relinquished
the SaluMedica license for the hydrogel application in the
hand.

Prior to
the 4thquarter of
2009, the Company explored business strategies through our three
development units, MiMedx, SpineMedica and LeveL Orthopedics. After
the sale of the LeveL assets and a thorough review of the strategic
direction of the Company, management made the decision in late 2009
to consolidate the organizational structure. Instead of independent
development teams and manufacturing locations, we will have
integrated development teams and all manufacturing will be
consolidated into one site. Our Tampa, Florida location will focus
on research and early stage product and process development. Our
Marietta, Georgia location will house our corporate headquarters,
our development and sales teams and all manufacturing and
distribution operations.

In
December 2009 we made the decision to simplify our corporate
and technology branding in order to build a stronger brand
identity. Our new branding strategy is to focus on MiMedx Group,
Inc. as the corporate brand identity and to brand each of our
technologies, rather than each product embodying our technologies.
Our PVA Hydrogel technology is now called HydroFix™ and our
collagen fiber technology is now called CollaFix™. We are
currently transitioning the name of our current product from
Paradís Vaso Shield™ to HydroFix™ Vaso
Shield.

Our
Products

CollaFix™Products

The
CollaFix™ technology combines an innovative means of creating
fibers from soluble collagen and a unique cross-linking process
that utilizes nordihydroguaiaretic acid (“NDGA”), a
naturally occurring plant compound. Initial laboratory and animal
testing shows that collagen cross-linked with NDGA produces a very
strong, biocompatible, and durable fiber that can be transformed
into surgical meshes intended to treat a number of orthopedic
soft-tissue trauma and disease disorders. Furthermore, tests have
shown NDGA biocompatibilizes certain materials that may otherwise
create a foreign body response. NDGA is a biological compound, and
therefore biomaterials cross-linked with NDGA are composed entirely
of biological components.

Embodiments
and benefits of products that we believe, based on preliminary
studies, could be developed using this licensed technology
are:

•

Initial
tests of fibers cross-linked with NDGA appear to demonstrate they
are stronger than existing collagenous tissue, including healthy
tendons and ligaments. These fibers form the fundamental unit from
which a variety of devices could be configured as
follows:

•

Linear and
braided arrays for tendon and ligament repair

•

Cross-helical
arrays forming tubular structures that also can be cut to form flat
patches

•

Woven
meshes for general surgical use;

•

NDGA-treated
biomaterials have been tested and results preliminarily suggest
that the materials are biocompatible and biodegradable;

•

Biocompatibilization
(making a material biocompatible that may otherwise not be) of
in-dwelling medical devices by coating with NDGA polymerized
collagen;

•

NDGA
treatment of xenograft (animal in origin) and allograft (human in
origin) materials could make them more biocompatible and possibly
improve functional lifetime; and

•

NDGA-treated
collagen-based biorivets have the potential to be used for bone
fracture fixation.

Our core
collagen technology is licensed to us and is embodied in two
patents. The core patent covers the polymerization chemistry of
NDGA as applied to biological materials, bioprostheses, or devices
created through its application. It covers chemistries and
compounds that have the reactive groups that are responsible for
the effectiveness of NDGA, including a variety of organically
synthesized NDGA analogs and natural compounds. Multiple medical
products potentially could be developed and patented that are all
tied to the core patented technology.

We are
currently pursuing the manufacture and optimization of various
collagen constructs and we are focused on advancing our products
through the regulatory process to receive FDA clearance to
introduce our products to the market.

We may
license rights to specific aspects of our collagen technology to
third parties for use in applications and indications that we
choose not to exploit ourselves.

HydroFix™
Products

We license
rights to a PVA polymer, which is a water-based biomaterial that
can be manufactured with a wide range of mechanical properties,
including those that appear to mimic closely the mechanical and
physical properties of natural, healthy human tissue. This hydrogel
has been used in other orthopedic and general surgery device
applications, and we believe it has demonstrated biocompatibility
and durability inside the human body. Regulatory agencies both
inside and outside the United States have cleared the hydrogel
material for use inside the body for several applications. For
example, in the United States, the FDA has cleared devices using
the hydrogel material for use as a cover for vessels following
anterior vertebral surgery as well as for use next to nerves. In
the European Union and Canada, devices using the hydrogel material
have been cleared for use next to nerves, to replace worn-out and
lesioned cartilage in the knee, and as a post-surgical adhesion
inhibiting barrier for spine surgeries in specific
locations.

As
mentioned above, on April 20, 2009, we received FDA clearance
via a 510(k), for our Paradís Vaso Shield™, recently
renamed HydroFix™ Vaso Shield (the “Vaso
Shield”), which is a vessel guard made of our hydrogel
material. Protection of veins and arteries is a common issue
associated with many types of surgeries. Protection of the aorta,
vena cava, iliac vessels and other anatomy is particularly
important in anterior spine surgery. The HydroFix™ Vaso
Shield was designed to help physicians protect vessels following
anterior vertebral surgery. The FDA cleared the HydroFix™
Vaso Shield as a vessel guard or cover for anterior vertebral
surgery, however, the safety and effectiveness of this device for
reducing the incidence, severity and extent of post-operative
adhesion formation has not been established.

We have a
similar version of the product for the European market called
HydroFix™ Spine Shield, which has recently received the CE
mark. The device is classified as a post-surgical adhesion
inhibiting barrier and is used in specific spine surgeries. The CE
marking, also known as “CE Mark,” is a mandatory
conformity mark on many products placed on the single market in the
European Economic Area (EEA). The CE marking certifies that a
product has met European Union (EU) consumer safety, health or
environmental requirements. The CE marked HydroFix™ Spine
Shield is not available in the United States.

We are
currently in the process of identifying other uses and indications
for the HydroFix™ technologies, including, but not limited to
other areas of the spine as well as healthcare categories outside
the spine, such as general surgery, obstetrics, and gynecology,
maxilla-facial, plastic and cosmetic applications, and others. We
filed our second 510(k) application for the HydroFix™ sheet
material in February 2010 for anticipated use in orthopedic
applications.

Market
Opportunity

In 2008,
the value of the Orthopedic-Biomaterials segment was estimated to
be $7.4 billion, representing over 20% of the total Orthopedic
Market. It is estimated that this market segment will grow at over
13% per year, which is more than double the growth rate for the
overall Orthopedics Market. The Biomaterials market is expected to
grow to a value of $9.4 billion by 2011, mainly due to
advancements in materials science technology, the incidence of
trauma and disease associated with the baby-boomer population and
resource focus and investment (MedMarket Diligence, Report #M625,
“Emerging Trends, Technologies and Opportunities in the
Markets for Orthopedic Biomaterials, Worldwide”,
2008).

Orthopedics
is one of the largest medical sectors utilizing biomaterials. The
development of advanced generation products has prompted many
orthopedic companies whose foundations lie in traditional therapies
to focus on biomaterials due to physician and patient demand. We
believe that new biomaterial products will continue to replace
existing products.

We believe
that the number of procedures that might utilize our products is
large. The total number of procedures of arthroscopy and
soft-tissue repair (including shoulders, hands, knees, ankles, and
elbows) in 2003 was estimated at approximately 2.6 million
compared to approximately 2.3 million procedures in 2002
according to The Ortho FactBook (2006), published by
Knowledge Enterprises, Inc.

Rotator
cuff injuries represent a leading cause of shoulder instability and
result in approximately 300,000 invasive procedures annually,
according to MedTech Insight, an industry marketing research
firm.

Also, the
NDGA-based biomaterials and related processes under license may
prove suitable for use in general surgical procedures for
reinforcement of soft tissue where weakness exists or scar tissue
formation is not desirable.

The market
revenues for biomaterials in wound care are expected to rise at an
accelerated compound annual growth rate of 16.5% from 2006-2013.
Combination products (biomaterial dressings that also possess moist
dressing, antimicrobials, or alginates) are further driving growth
and gaining market share from other advanced wound dressing
segments, according to the Frost and Sullivan US Interactive Wound
Care Markets Report for 2008.

The market
for general soft-tissue patches and slings is not heavily populated
because few products have fully satisfied clinical needs and
physicians and patients are demanding implants that resorb over
time. In 2005, the general soft-tissue repair market for the
products listed above was valued at over $600 million in the
United States and over $500 million in Europe, with an
anticipated growth rate of 14% through 2010, according to a 2006
market research report by Millennium Research Group.

Advancements
in tendon surgery have focused largely on augmenting the standard
of care using synthetic and biomaterials including collagen based
devices. Advancements in ligament surgery have focused largely on
new methods of graft fixation using interference screws and
anchors, which have opened new approaches to repair. We believe
there is a new wave of development for ligament and tendon repair,
including collagen matrices, allografts and tissue engineered
tendons and ligaments that we believe will change how physicians
treat these procedures. Therapeutic modalities we continue to focus
on are related to the treatment and repair of soft tissues during
tendon repair surgery, including reinforcement of the rotator cuff,
patellar, Achilles, biceps, quadriceps or other tendons. Following
clinical development of the above, we plan to focus on treatments
for ligaments and joints, such as medial and lateral collateral
ligaments of the knee, elbow and ankle and meniscal repair. Our
products potentially could be used in other orthopedic categories
as well.

PVA-Based
Biomaterials

Our PVA
based biomaterial, HydroFix™, has been used in several
medical device applications and is cleared by the FDA for use as a
cover for vessels following anterior vertebral surgery and for use
as a nerve cuff (SaluMedica, LLC). We have licensed the right to
use Salubria®,
SaluMedica LLC’s formulation, or similar PVA-based
biomaterials for certain applications within the body under a
world-wide license (see “Collaborations and License
Agreements”). The material, as Salubria®, has been
sold in Europe for certain applications for over seven years. The
PVA-based hydrogel can be processed to have mechanical and physical
properties similar to that of human tissue. The biostable hydrogel
composition contains water in similar proportions to human tissue,
mimicking human tissue’s strength and compliance. For certain
applications, the PVA-based hydrogel has been formulated to be
wear-resistant and strong. The base organic polymer is known to be
biocompatible and hydrophilic. These properties make it a candidate
for use as an implant, and may prove suitable for development into
medical products addressing various applications. The PVA-based
hydrogel and products formed therefrom are MRI compatible (allowing
for Magnetic Resonance Imaging of a patient with no artifacts or
special safety precautions necessary). We currently license the
PVA-based hydrogel for use in the spine, rotator cuff and as a
surgical sheet.

Spine
Anatomy and Disorders

The spine
is considered by many orthopedic and neurosurgeons to be the most
complex motion segment of the human body. It provides a balance
between structural support and flexibility. It consists of 26
separate bones called vertebrae that are connected together by
connective tissue to permit a normal range of motion. The spinal
cord, the body’s central nerve conduit, is enclosed within
the spinal column. Vertebrae are paired into what are called motion
segments that move by means of three joints: two facet joints and
one spinal disc.

The four
major categories of spine disorders are degenerative conditions,
deformities, trauma and tumors. The largest market is degenerative
conditions of the vertebral discs. These conditions can result in
instability, pressure and impingement on the nerve roots as they
exit the spinal column, causing often severe and debilitating pain
in the back, arms and/or legs.

Current
Treatments for Spine Disorders

The
current prescribed treatment for spine disorders depends on the
severity and duration of the disorder. Initially, physicians
typically prescribe non-operative procedures including bed rest,
medication, lifestyle modification, exercise, physical therapy,
chiropractic care and steroid injections. Non-operative treatment
options are often effective; however, other patients require spine
surgery. According to Knowledge Enterprises, Inc., the number of
spine surgery procedures grew to over 1.2 million per
year in 2005 in the United States. The most common spine surgery
procedures are: discectomy, the removal of all or part of a damaged
disc; laminectomy, the removal of all or part of a lamina, or thin
layer of bone, to relieve pinching of the nerve and narrowing of
the spinal canal; and fusion, where two or more adjoining vertebrae
are fused together to provide stability.

Spine
Repair and Vessel Protection

MedTech
Insight, LLC’s March 2007 report on “United States
Markets for Spinal Motion Preservation Devices,” states that
an estimated 50 million people in the United States suffer
from back pain. This report also states that in 2004, more than
1 million spine surgeries were performed in the United
States—far more than the number of hip and knee replacements
combined. Factors driving growth of the spine surgery products
market include the growing number of people with degenerative disc
disease, which typically is caused by gradual disc damage and often
results in disc herniation and chronic, debilitating lower back
pain. It is most common among otherwise healthy people in their 30s
and 40s and affects approximately half of the United States
population age 40 and older.

A disc
herniation, or abnormal bulge or rupture, is often caused by
degenerative disc disease but may also result from trauma and/or
injury. As we age, the disc’s nucleus pulposus , or
the center of a spinal disc, loses its water content and the disc
begins to degenerate, becoming drier, less flexible, and prone to
damage or tears. By the time a person reaches age 80, the nucleus
pulposus’ water content decreases to approximately 74%;
during the first year of a person’s life, the water content
is approximately 90%. The annulus fibrosus, or the outer rim
of a spinal disc, also may be damaged by general wear and tear or
by injury and can cause bulging and impingement on adjacent nerve
roots.

Repair of
herniated intervertebral discs or damage as a result of
degenerative disc disease commonly involves surgical intervention
such as fusion or total disc replacement (TDR). Postsurgical
adhesions and fibrosis formation are a common consequence of the
normal healing process. The presence of fibrosis may render
reoperations or follow-up surgeries risky and have caused nerve
root tethering in some patients.

One
approach to protecting vessels following anterior vertebral surgery
is to provide a barrier between the anterior spine and adjacent
vessels. Some studies, not performed by us, have demonstrated that
the application of a barrier to protect adjacent vessels may create
a dissection plane for future surgeries in that anatomical
area.

The safety
and effectiveness of the FDA cleared HydroFix™ Vaso Shield
device for reducing the incidence, severity and extent of
post-operative adhesion formation has not been
established.

Another
market for which a barrier or plane of dissection-type product is
needed is in gynecological uses where the removal and surgical
cutting of fibroids and cysts, hysterectomies, and other procedures
may lead to post-surgical adhesions. Such adhesions may result in
infertility and pelvic pain. Gynecological surgery provides a
compelling market because of the high volume of procedures
worldwide, and because gynecological infertility surgery is
frequently followed up by a laparoscopic second-look procedure at
the disease site.

There are
many other medical categories for which scar-tissue and fibrosis
formation are complicating issues and the Company is researching
opportunities for expansion of this product platform.

Physician
Advisory Boards

We have
empanelled a number of key physician opinion leaders in relevant
fields by asking these physicians to serve on one of our Physician
Advisory Boards (“PABs”). Each has entered into a
consulting agreement with the Company.

Our PABs
include physicians who move medicine forward by scientific
endeavor, such as publishing, teaching and developing new solutions
to treat injury and diseases. Several members chair their
respective departments at university medical schools, teaching
institutions and fellowship programs.

The
Chairman of our Sports Medicine PAB is James Andrews, M.D., of
Birmingham, Alabama, and Gulf Breeze, Florida. Dr. Andrews is
one of the best known and most respected sports-medicine physicians
in the world. He is the physician for several National Football
League and Major League Baseball teams and treats many of the
highest-paid professional athletes from numerous teams and from a
multitude of sports, including Drew Brees, the 2010 Superbowl MVP,
and is regularly profiled in newspapers and magazines.
Dr. Andrews also runs a sought-after fellowship
program.

The Sports
Committee is chaired by Lonnie Paulos, M.D. a renowned orthopedic
surgeon and researcher. Dr. Paulos is presently a surgeon at
the Andrews-Paulos Institute for Orthopedics & Sports Medicine
in Gulf Breeze, Florida. He is the former physician to the
Cincinnati Bengals, Cincinnati Reds, US Ski team, and the US
Gymnastics Federation.

Similarly,
we have assembled a group of leading orthopedic spine and
neurosurgeons who are advising on the development of our spinal
implants, instruments and surgical procedures

The
Chairman of the Spine PAB is Randal Betz, M.D. Dr. Betz holds
hospital positions as Chief of Staff at Shriners Hospitals for
Children and Medical Director of Shriners’ Spinal Cord Injury
Unit, in Philadelphia, PA. Additionally, Dr. Betz is on staff
at Temple University Children’s Medical Center and is a
Professor of Orthopaedic Surgery at Temple University School of
Medicine.

Our
products are medical devices subject to extensive regulation by the
FDA, under the Federal Food, Drug, and Cosmetic Act and they are
also regulated in the European Union through the Medical Device
Directive. Similar regulations apply in other countries. These
regulations govern, among other things, the following
activities:

•

product
design and development;

•

product
testing;

•

product
manufacturing;

•

product
labeling;

•

product
storage;

•

premarket
clearance or approval;

•

advertising
and promotion;

•

product
sales and distribution; and

•

medical
device reporting.

Each
medical device that we distribute commercially in the U.S. likely
will require either 510(k) clearance or Premarket Approval
(“PMA”) from the FDA prior to marketing. Devices deemed
to pose relatively less risk are placed in either Class I or
II which requires the manufacturer to submit a premarket
notification requesting permission for commercial distribution;
this is known as 510(k) clearance, which indicates that the device
is substantially equivalent to devices already legally on the
market. Most Class I devices are considered very low risk and
are exempted from this requirement. Devices deemed by the FDA to
pose the greatest risk, such as life-sustaining, life-supporting or
implantable devices, or devices deemed not substantially equivalent
to a previously 510(k) cleared device or a pre-amendment
Class III device for which PMA applications have not been
required, are placed in Class III, requiring PMA
approval.

Some of
our products contain biologic materials. We believe that the FDA
will regulate our products as medical devices. However, the FDA may
determine that some of our products are combination products
comprised of a biologic and medical device component. For a
combination product, the FDA must determine which center or centers
within the FDA will review the products and under what legal
authority the products will be reviewed. While we believe our
products would likely be regulated under the medical device
authorities even if they are deemed “combination
products,” there can be no assurances that the FDA will
agree. In addition, the review of combination products is often
more complex and more time consuming than the review of a product
under the jurisdiction of only one center within the
FDA.

510(k)Clearance Pathway

To obtain
510(k) clearance for one of our products, we must submit a
premarket notification demonstrating that the proposed device is
substantially equivalent in intended use and in safety and
effectiveness to a previously 510(k) cleared device or a device
that was in commercial distribution before May 28, 1976, for
which the FDA has not yet called for submission of PMA
applications. The FDA’s 510(k) clearance pathway usually
takes from four to 12 months, but it can take significantly
longer for submissions that include clinical data.

After a
device receives 510(k) clearance, any modification that could
significantly affect its safety or effectiveness, or that would
constitute a major change in its intended use, requires a new
510(k) clearance or could require a PMA approval. The FDA requires
each manufacturer to make this determination in the first instance,
but the FDA can review any such decision. If the FDA disagrees with
a manufacturer’s decision not to seek a new 510(k) clearance,
the agency may retroactively require the manufacturer to seek
510(k) clearance or PMA approval. As part of the PMA review, the
FDA typically will inspect the manufacturer’s facilities for
compliance with Quality System Regulation, or QSR, requirements,
which prescribe elaborate testing, control, documentation and other
quality assurance procedures.

The FDA
also can require the manufacturer to cease marketing and/or recall
the modified device until 510(k) clearance or PMA approval is
obtained.

If 510(k)
clearance is unavailable for one of our products, the product must
follow the PMA approval pathway, which requires proof of the safety
and effectiveness of the device to the FDA’s satisfaction.
The PMA approval pathway is much more costly, lengthy and
uncertain. It generally takes from one to three years and can take
even longer.

A PMA
application must provide extensive preclinical and clinical trial
data and also information about the device and its components
regarding, among other things, device design, manufacturing and
labeling. As mentioned above, in conjunction with a PMA review, the
FDA typically will inspect the manufacturer’s facilities for
compliance with QSR requirements, which prescribe elaborate
testing, control, documentation and other quality assurance
procedures.

Upon
submission, the FDA determines if the PMA application is
sufficiently complete to permit a substantive review, and, if so,
the application is accepted for filing. The FDA then commences an
in-depth review of the PMA application, which typically takes one
to three years, but may take longer. The review time is often
significantly extended as a result of the FDA asking for more
information or clarification of information already provided. The
FDA also may respond with a “not approvable”
determination based on deficiencies in the application and require
additional clinical trials that are often expensive and time
consuming and can delay approval for months or even years. During
the review period, an FDA advisory committee may be convened to
review the application and recommend to the FDA whether, or upon
what conditions, the device should be approved. Although the FDA is
not bound by the advisory panel decision, the panel’s
recommendation is important to the FDA’s overall decision
making process.

If the
FDA’s evaluation of the PMA application is favorable, the FDA
typically issues an “approvable letter” requiring the
applicant’s agreement to specific conditions ( e.g. ,
changes in labeling) or specific additional information (
e.g. , submission of final labeling) in order to secure
final approval of the PMA application. Once the approvable letter
is satisfied, the FDA will issue a PMA for the approved
indications, which can be more limited than those originally sought
by the manufacturer. The PMA can include post approval conditions
that the FDA believes necessary to ensure the safety and
effectiveness of the device including, among other things,
restrictions on labeling, promotion, sale and distribution. Failure
to comply with the conditions of approval can result in material
adverse enforcement action, including the loss or withdrawal of the
approval. Even after approval of a PMA, a new PMA or PMA supplement
is required in the event of a modification to the device, its
labeling or its manufacturing process.

Clinical
Trials

A clinical
trial is generally required to support a PMA application and is
sometimes required for a premarket notification. Such trials
generally require submission of an application for an
Investigational Device Exemption, or IDE. The IDE application must
be supported by appropriate data, such as animal and laboratory
testing results, showing that it is safe to test the device in
humans and that the testing protocol is scientifically sound. The
IDE must be approved in advance by the FDA for a specified number
of patients (unless the product is deemed a nonsignificant risk
device eligible for more abbreviated IDE requirements). Clinical
trials are subject to extensive monitoring, record keeping and
reporting requirements. Clinical trials may begin once the IDE
application is approved by the FDA and the appropriate
institutional review boards, or IRBs, at the clinical trial sites,
and must comply with FDA regulations. To conduct a clinical trial,
we also are required to obtain the patients’ informed consent
that complies with both FDA requirements and state and federal
privacy and human subject protection regulations. We, the FDA or
the IRB could suspend a clinical trial at any time for various
reasons, including a belief that the risks to study subjects
outweigh the anticipated benefits. Even if a trial is completed,
the results of clinical testing may not adequately demonstrate the
safety and efficacy of the device or may otherwise not be
sufficient to obtain FDA approval to market the product in the
U.S.

After a
device is placed on the market, numerous regulatory requirements
apply. These include: the Quality System Regulation, which requires
manufacturers to follow elaborate design, testing, control,
documentation and other quality assurance procedures during the
manufacturing process; labeling regulations; the FDA’s
general prohibition against promoting products for unapproved or
“off-label” uses; and the Medical Device Reporting
regulation, which requires that manufacturers report to the FDA if
their device may have caused or contributed to a death or serious
injury or malfunctioned in a way that would likely cause or
contribute to a death or serious injury if it were to recur.
Class II devices also can have special controls such as
performance standards, postmarket surveillance, patient registries,
and FDA guidelines that do not apply to Class I
devices.

We are
subject to inspection and marketing surveillance by the FDA to
determine our compliance with regulatory requirements. If the FDA
finds that we have failed to comply, it can institute a wide
variety of enforcement actions, ranging from a public warning
letter to more severe sanctions such as:

•

fines,
injunctions, and civil penalties;

•

recall or
seizure of our products;

•

operating
restrictions, partial suspension or total shutdown of
production;

•

refusing
our requests for 510(k) clearance or PMA approval of new
products;

•

withdrawing
510(k) clearance or PMA approvals already granted; and

•

criminal
prosecution.

The FDA
also has the authority to require repair, replacement or refund of
the cost of any medical device that we have manufactured or
distributed.

International

International
sales of medical devices are subject to foreign government
regulations, which vary substantially from country to country. The
time required to obtain approval by a foreign country may be longer
or shorter than that required for FDA approval, and the
requirements may differ. In addition, the export of certain of our
products that have not yet been cleared or approved for domestic
distribution may be subject to FDA export restrictions. There can
be no assurance that we will receive on a timely basis, if at all,
any foreign government or United States export approvals necessary
for the marketing of our products abroad.

The
primary regulatory environment in Europe is that of the European
Union, which consists of twenty-seven countries, encompassing most
of the major countries in Europe. Other countries, such as
Switzerland, have voluntarily adopted laws and regulations that
mirror those of the European Union with respect to medical devices.
The European Union has adopted numerous directives and standards
regulating design, manufacture, clinical trials, labeling, and
adverse event reporting for medical devices. Devices that comply
with the requirements of a relevant directive will be entitled to
bear a CE Mark and can be commercially distributed throughout
Europe. The method of assessing conformity varies depending on the
class of the product, but normally involves a combination of
self-assessment by the manufacturer and a third party assessment by
a “Notified Body.” This third party assessment may
consist of an audit of the manufacturer’s quality system and
specific testing of the manufacturer’s product. An assessment
by a Notified Body in one country within the European Union is
required in order for a manufacturer to commercially distribute the
product throughout the European Union.

Export of
Uncleared or Unapproved Devices

Export of
devices eligible for the 510(k) clearance process, but not yet
cleared to market, is permitted without FDA approval, provided that
certain requirements are met. Unapproved devices subject to the PMA
process can be exported to any country without FDA approval
provided that, among other things, they are not contrary to the
laws of the country to which they are intended for import, they are
manufactured in substantial compliance with the Quality System
Regulations, and they have been granted valid marketing
authorization by any member country of the European Union,
Australia, Canada, Israel, Japan, New Zealand, Switzerland or South
Africa. If these conditions are not met, FDA approval must be
obtained, among other things, by demonstrating to the FDA that the
product is approved for import into the country to which it is to
be exported and, in some cases, by providing safety data for the
device. There can be no assurance that the FDA will grant export
approval when necessary or that countries to which the device is to
be exported will approve the device for import. Our failure to
obtain necessary FDA export authorization and/or import approval
could have a material adverse effect on our business, financial
condition and results of operation.

On
April 20, 2009, the Company received FDA clearance to market
the HydroFix™ Vaso Shield (formerly called
Paradís™ Vaso Shield) device, indicated for use as a
cover for vessels following anterior vertebral surgery. The
proprietary, patented, and PVA based membrane may reduce the risk
of associated injury following anterior vertebral surgeries by
providing a vessel cover. We have products under development that
may qualify for 510(k), such as NDGA-polymerized collagen implants
and additional sheet products made from PVA-based hydrogel. In
February 2010 we filed two additional 510
(k) submissions, one for an orthopedic application of our
HydroFixTMSheet. The
second was for our first Collagen product submission for general
soft tissue repair. There can be no assurance of the outcome of
these submissions or the timeframe to complete the
process.

Reimbursement—Procedures,
Profitability and Costs

Our
products likely will be purchased by hospitals or ambulatory
surgery centers that are reimbursed by third-party payers. In the
U.S., such payers include governmental programs (e.g., Medicare and
Medicaid), private insurance plans, managed care programs and
workers’ compensation plans. Governmental payment programs
have prescribed reimbursement rates for procedures and medical
products. Similarly, private third-party payers have carefully
negotiated payment levels for procedures and medical products. In
addition, in the United States, an increasing percentage of insured
individuals are receiving their medical care through managed care
programs, which monitor and may require pre-approval of the
services that a member will receive. Our success depends on
adequate levels of third-party reimbursement for our
products.

In those
countries outside the U.S. where our products are approved for
sale, we expect that sales volumes and prices of our products will
be influenced by the availability of reimbursement from governments
or third-party payers. If adequate levels of reimbursement from
governments or third-party payers outside of the U.S. are not
obtained, international sales of our products will be limited.
Outside of the U.S., reimbursement systems vary significantly by
country. Many foreign markets have government-managed health care
systems that govern reimbursement for medical devices and
procedures and often require special consideration for
reimbursement for a new device.

We are
currently working with industry reimbursement consultants to aid in
the reimbursement planning for our products. At this time there can
be no assurance that reimbursement policies will provide an
acceptable return on our products.

Competition

CollaFix™
Products

In the US
in 2007, approximately 2,090,000 orthopedic soft tissue repair
procedures were performed. This procedure volume is growing at a
rate of 4.5 % supported by the rising number of sports-related
injuries, particularly among the increasingly active aging
population. Source: US Markets for Orthopedic Soft Tissue Solutions
2008, Millennium Research Group

There are
currently a large number of devices on the market used to reinforce
surgically repaired soft tissues. These include hardware (screws,
pins, disposables) as well as allografts, synthetic products and
xenografts (derived from porcine, bovine and equine
tissues).

Leading
Competitors in the Orthopedic Soft Tissue Solutions Market, as a %
of Total, US, 2007.

Percent
of US total

Leading
Competitors

Soft
Tissue Market

Arthrex

33.8

%

DePuy
Mitek

17.1

%

Smith and
Nephew

13.2

%

CONMED
Linvatec

5.8

%

Genzyme
Biosurgery

3.4

%

Musculoskeletal
Transplant Foundation

3.2

%

Biomet
Sports Medicine

3.1

%

AlloSource

2.7

%

ArthroCare

2.1

%

LifeNet
Health

1.9

%

Other

13.7

%

Source: US
Markets for Orthopedic Soft Tissue Solutions 2008, Millennium
Research Group

There are
several technologies currently on the market or anticipated to
enter the market for ligament and tendon repair and/or
replacements. Those technologies include collagen matrices,
cell-seeded polymer scaffolds, cryopreserved allografts,
fibroblast-seeded ligament analogs, and small intestinal
submucosa.

Competitors
who market collagen based devices currently include:

Developer

Product

Cross-linking

DePuy

RESTORE

None

Wright
Medical Technology

GraftJacket

None

Synovis

OrthAdapt

Carbodiimide

ReGen
Biologics

Collagen
matrices

None

Biomet/Organogenesis

CuffPatch

Carbodiimide

The above
technologies may or may not utilize cross-linking agents, which are
FDA-approved and used in the manufacturing of collagen for
soft-tissue repair. The current market leader is the Restore
Orthobiologic Soft Tissue Implant from DePuy. It utilizes small
intestinal submucosa of porcine origin. We believe our collagen
fiber-based devices will provide better reinforcement for tendon
and ligament repair because they are made of high strength
cross-linked collagen fibers and, by mimicking the natural fiber
orientation in tendons and ligaments, they provide targeted
mechanical properties equivalent to those of tendons and
ligaments.

There are
a few synthetic products, such as W.L. Gore’s GoreTex, 3M
Kennedy Ligament Augmentation Device (“LAD”), and
Stryker’s Meadox Dacron Ligament Augmentation Graft which
were developed for use in Anterior Cruciate Ligament
(ACL) reconstruction. These were first and second generation
soft-tissue repair products and generally produce results that we
believe are less satisfactory than those containing soft-tissue
constructs, because the materials tend to stretch and become
deformed over time.

HydroFix™
Products

Spinal
Orthopaedic and neurosurgeons actively seek patient treatment
alternatives and utilize various technologies during different
stages of the patient care continuum. Until the recent success of
non-fusion technologies, spine implant market manufacturers have
focused almost exclusively on refining and improving spinal fusion
techniques. Multiple fusion techniques and products are available
to patients today.

Regardless
of the type of surgery, fusion or TDR, physicians commonly deal
with venous injury during anterior spinal revision surgery.
Currently, competition for vessel guards for this specific
application is limited. W.L. Gore & Associates, Inc. is the
dominant manufacturer in this area.

Collaborations
and License Agreements

License
Agreement between MiMedx, Shriners Hospitals for Children, and
University of South Florida Research Foundation

We entered
into a license agreement with Shriners Hospitals for Children and
University of South Florida Research Foundation (collectively
“Licensor”) in January 2007 for the worldwide,
exclusive rights for all applications using NDGA-polymerized
materials, including for reconstruction of soft tissue. We paid a
one-time license fee of $100,000, plus issued to the Licensor
1,120,000 shares of our Common Stock, and the Licensor will receive
future additional milestone payments and continuing royalties based
on sales of all licensed products.

The
license is perpetual and terminable by us at any time, in whole or
in part. The licensor has the right to terminate this license in
the event that any breach, which they are required to give us
notice, is not cured.

In
August 2005 we entered into an exclusive, perpetual,
worldwide, non-terminable, royalty-free, transferable license of
certain patents and patent application rights held by SaluMedica,
LLC that relate to a PVA-based hydrogel. SpineMedica has the right
to manufacture, market, use and sell medical devices and products
incorporating the claimed technology for all neurological and
orthopedic uses related to the human spine, including muscular and
skeletal uses. Some of the licensed patents and patent application
rights are owned by SaluMedica, LLC and at least one of these
patent and patent application rights is licensed by SaluMedica, LLC
from Georgia Tech Research Corporation. In connection with this
license agreement, SpineMedica also acquired certain of SaluMedica,
LLC’s assets, including manufacturing and testing equipment
and office equipment, and obtained a license to use the trademarks
“SaluMedica™” and “Salubria®biomaterial.”

License
Agreement between SaluMedica, LLC and Georgia Tech Research
Corporation

Some of
the patents and patent application rights licensed to SpineMedica
by SaluMedica, LLC are licensed to SaluMedica, LLC from Georgia
Tech Research Corporation. SaluMedica, LLC and Georgia Tech
Research Corporation have agreed that in the event the license
agreement between them is terminated for any reason (other than the
expiration of the patents), Georgia Tech Research Corporation will
license the technology to SpineMedica for uses related to the human
spine on substantially the same terms as granted to SaluMedica, LLC
without further payment.

Hand
License with SaluMedica, LLC

MiMedx has
a Technology License Agreement, as amended by a First Amendment to
Technology License Agreement, as well as a related Trademark
License Agreement, all dated August 3, 2007, (collectively,
the “Hand License”) that provides MiMedx with the
exclusive, fully-paid, worldwide, royalty-free, irrevocable and
non-terminable (except as provided in the Hand License), and
sublicensable rights to develop, use, manufacture, market, and sell
Salubria®biomaterial
or similar PVA-based hydrogels for all neurological and orthopedic
uses (including muscular and skeletal uses) related to the rotator
cuff and the hand (excluding the wrist), but excluding the product
SaluBridge (which is made from Salubria®biomaterial
and is currently cleared for use by the FDA) (the “Licensed
Hand IP”). SaluMedica, LLC’s rights in the Licensed
Hand IP derive from and are subject to one or
more licenses from Georgia Tech Research Corporation and,
consequently, the Hand License is subject to those
same licenses. This license was amended in October 2009
to relinquish the license for uses related to the hand but to keep
the rotator cuff license.

Surgical
Sheet License with SaluMedica, LLC

On
March 31, 2008, we entered into an exclusive world-wide
license with SaluMedica, LLC for a PVA-based hydrogel biomaterial
for applications as a surgical sheet. The license covers both
internal and external applications. In exchange for the exclusive,
worldwide, perpetual license to develop, manufacture, and sell the
“surgical sheet” technology for application anywhere in
the body, we issued SaluMedica, LLC 400,000 shares of restricted
Common Stock. In addition, SaluMedica, LLC is eligible to receive
up to an aggregate additional 600,000 shares of restricted Common
Stock if certain sales and revenue milestones are achieved not
later than June 30, 2013. On December 31, 2009, we
completed the sale of our first commercial product, the
HydroFix™ Vaso Shield, and met the first milestone under this
agreement. As a result we issued 100,000 shares of Common Stock to
the licensor valued at $71,000.

Intellectual
Property

Our
intellectual property includes licensed patents, owned and licensed
patent applications and patents pending, proprietary manufacturing
processes and trade secrets, brands, trademarks and trade names
associated with our technology. Furthermore, we require employees,
consultants and advisors to sign Proprietary Information and
Inventions Agreements as well as Nondisclosure Agreements that
assign to us and protect the intellectual property existing and
generated from their work and that we may use and own
exclusively.

The
pending and provisional patent applications may not issue into
patents, as is true with any provisional or patent
application.

Any
improvements to Salubria®developed
by SaluMedica, LLC during the life of the licensed patents are
included as part of the license from SaluMedica, LLC. The Company
will own all improvements to Salubria®that we
develop. However, we will license these improvements to SaluMedica,
LLC for no additional consideration, provided that the use of these
improvements must be unrelated to all neurological and orthopedic
uses, including muscular and skeletal uses, related to the human
spine.

Trademarks
& Trade Names

We also
own trademark and trade name registration of the mark
Paradís Vaso ShieldTMand
license the SaluMedica™ and Salubria®trademarks.
We also have applied for registration of the HydroFix™,
CollaFix™ and MiMedx™ trademarks.

Manufacturing

MiMedx
Group performs research and early stage product and process
development activities and operates a pilot production facility for
its proprietary CollaFix™ cross-linked collagen products in
its Tampa, Florida, facility. In the future, we may contract with
third parties to perform certain manufacturing or assembly of the
products that are developed and enter into strategic relationships
for sales and marketing of products that we develop.

Our
Marietta, Georgia, facility is also our corporate headquarters,
which houses our general management, sales, marketing, product
development, quality and regulatory functions as well as the
consolidation of our manufacturing operations for HydroFix™
and CollaFix™.

We are
subject to the FDA’s quality system regulations, state
regulations, and regulations promulgated by the European Union. We
are FDA registered, CE marked and ISO certified. Our facilities are
subject to periodic unannounced inspections by regulatory
authorities, and may undergo compliance inspections conducted by
the FDA and corresponding state and foreign agencies.

Suppliers

We have
identified reliable sources and suppliers of collagen, source
materials of NDGA, which we believe will provide a product in
compliance with FDA guidelines. We engage in the manufacture of our
own hydrogel products and accessibility to critical raw materials
for the PVA-based biomaterial products is not inhibited by supply
or market constraints.

Marketing
and Sales

We plan to
utilize our experienced management team to commercialize these
medical technologies by advancing them through the proper
regulatory approval processes, developing or arranging for reliable
and cost-effective manufacturing, and to either sell or license the
product lines to others or market and sell the products. For our
first U.S. product, HydroFix™ Vaso Shield, we are in the
process of assembling a network of independent sales
representatives to sell our products domestically. We are
assembling a network of stocking distributors for our first
European product, HydroFix™ Spine Shield.

As of
December 31, 2009, we have 40 employees, of whom 37 are
full-time and three are part-time employees. We consider our
relationships with our employees to be satisfactory. None of our
employees is covered by a collective bargaining
agreement.

Litigation

We are not
involved in any litigation, nor are we aware of any threatened
litigation.

Research
and Development

Our
research and development efforts are focused on developing products
for various surgical and orthopedic markets using NDGA
biomaterials, and development of other sheet based spine products
and other sheet products using a PVA-based hydrogel. Our research
and development staff currently consists of 19 employees. To
support development, we have contracts with outside labs who aid us
in our research and development process. Our research and
development group has extensive experience in developing products
related to our field of interest, and works with our Physician
Advisory Boards to design products that are intended to improve
patient outcomes, simplify techniques, shorten procedures, reduce
hospitalization and rehabilitation times and, as a result, reduce
costs. From our inception in November 2006 to
December 31, 2009, we have spent approximately $8,740,000 on
research and development and $7,177,000 on acquired in-process
research and development. See “Management’s Discussion
and Analysis of Financial Condition and Results of
Operations” at Item 7 below for information regarding
expenditures for research and development in each of the last two
fiscal years.

Surgeon
Training and Education

We devote
significant resources to working with our Physician Advisory
Boards. We believe that the most effective way to introduce and
build market demand for our products will be by partnering with
leading surgeons from around the globe in the use of our products.
We have access to state-of-the-art cadaver operating theaters and
other training facilities at some of the nation’s leading
medical institutions. We intend to continue to focus on working
with leading surgeons in the United States. See
“Business-Physician Advisory Boards.”

Available
Information

Our
website address is www.mimedx.com . We make available
on this website under “Investor Relations – SEC
Filings,” free of charge, our proxy statements, annual
reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to those reports as soon as
reasonably practicable after we electronically file or furnish such
materials to the U.S. Securities and Exchange Commission
(“SEC”). In addition, we post filings of Forms 3, 4,
and 5 filed by our directors, executive officers and ten percent or
more shareholders. We also make available on this website under the
heading “Investor Relations – Corporate
Governance” our Audit Committee, Compensation Committee and
Corporate Governance and Nominating Committee Charters as well as
our Code of Business Conduct and Ethics.

Item 1A.
Risk Factors

Risks
Related to Our Business and Industry

We are a
high-risk startup venture.

With the
commercialization of our first product, we are transitioning from
being a development company to an operating company. Nonetheless,
most of our products are still in the development stage and we have
no significant operating history. We do not currently have any
material assets, other than cash, certain laboratory equipment, and
certain intellectual property rights. Our business and prospects
must be evaluated in light of the expenses, delays, uncertainties
and complications typically encountered by businesses in our stage
of development, many of which may be beyond our control. These
include, but are not limited to, lack of sufficient capital,
unanticipated problems, delays or expenses relating to product
development, governmental approvals, and licensing and marketing
activities, competition, technological changes and uncertain market
acceptance. In addition, if we are unable to manage growth
effectively, our operating results could be materially and
adversely affected. We must overcome these and other business risks
to be successful. Our efforts may not be successful. We may never
be profitable. Therefore, investors could lose their entire
investment.

Most of
our planned products are in the early stage of product
development.

We have
only had one product cleared by the FDA for market and two
additional products for which we have submitted 510(k) premarket
notifications to the FDA. Many of the possible products we have
rights to have had only limited research in the fields of use we
currently intend to commercialize. Our product candidates will
require testing and regulatory clearances or approvals.
Accordingly, most of the products we are developing are not yet
ready for sale and may never be ready for sale. The successful
development of any products is subject to the risks of failure
inherent in product development. These risks include the
possibilities that any or all of these proposed products or
procedures are found to be ineffective or toxic, or otherwise fail
to receive necessary regulatory clearances or approvals; that the
proposed products or procedures are uneconomical to market or do
not achieve broad market acceptance; that third parties hold
proprietary rights that preclude us from marketing them; or third
parties market a superior or equivalent product. We are unable to
predict whether our research and development activities will result
in any additional commercially viable products or procedures.
Furthermore, due to the extended testing and regulatory review
process required before marketing clearances or approvals can be
obtained, the time frames for commercialization of any products or
procedures are long and uncertain.

As of
December 31, 2009, we had approximately $2,654,000 of cash or
cash equivalents on hand. In January 2010, the Company
received final proceeds totaling $785,000 from a private placement
of common stock and warrants. Assuming it receives no additional
funds, the Company estimates that it has sufficient funds to
operate until June 2010. If we fail to obtain additional
capital in the immediate future, we will have to terminate our
planned business operations, in which case the investors will lose
all or part of their investment. In addition, as of
December 31, 2009, the Company had outstanding debt of
approximately $3,542,000 related to principal and interest under
its 3%

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